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During the covid era, Australia printed an estimated $600 billion it did not have. No wonder our economy is broken!

This is the view of Andrew Stone, one-time chief economist and senior policy advisor to the Hon Tony Abbott (as Opposition Leader and then as Prime Minister), in conversation with John Anderson (November 2021).

This essay is built upon the Stone interview. I am no economist, so I needed to defer to an expert to help unpack why our world has gone mad economically.

Inflation

In the old days, nations could only print currency based on their gold or silver reserves. Today, under the Fiat Money system, currencies only have value because the government maintains their value. So, when they print more dollars, governments are simply fuelling inflation, calling it quantitative easing.

What I find maddening is the government and media’s apparent surprise and dismay over the inflation figures. To me, printing an additional $600 billion was bound to have ignited inflation.

The way inflation is measured is tricky. What’s included and what’s not? How about including Sydney’s average house price increasing 17% in 2021? That’s massive and has had a dire impact on the distribution of wealth from younger to older Australians, for no good reason. It has wrecked many a household budget and their aspiration for home ownership.

Those young families with mortgages, the lucky ones, are presently terrified of the ever-increasing interest rates. On such huge borrowing, the smallest increase has dire consequences. This is madness! Particularly as policymakers are not even talking about it, far less acting on it.

Fertility Rates

Australia had a fertility rate of 2.1 per woman, the replacement rate for the population, in the 1970s. Since then, it dropped a bit, but wasn’t far off replacement. Then, in the Howard years, we got back above 2, a measure of the confidence that people had in the economy. In the last few years, it has plummeted. In 2020, it was 1.58. (In 2023, 1.66). This has huge demographic implications:

I can’t help but wonder, is it the fact that it’s so difficult to get into the housing market, that may be causing people to question how many children they have? (Stone). It’s a great irony to me that we should have to consider the cost of having children as being perhaps prohibitive; I think this culture is in quite dangerous waters. (Anderson)

The Great Reset (2020): Klaus Schwab & Thierry Malleret

I was delighted that this centrepiece of the World Economic Forum was discussed in a calm, thoughtful way.

The idea is to reinvent capitalism, to have stakeholder capitalism rather than shareholder capitalism. The idea of having billionaires, who fly into secret meetings in Davos in their private jets and then wish to tell me how they are going to reinvent the world for me, but its all for my own good. This is profoundly silly! … now they have attached to their plans so many others and made everything about race… We now talk about how positions should be decided on the basis of race. I find that a profoundly offensive idea. (Stone)

Two years ago, this economist saw the WEF plans were profoundly silly and profoundly offensive. But today, can we be assured that the Great Reset is not underway? It seems to me that most Western governments and large corporations are on board with it, so how can we stop them?

Modern Monetary Theory (MMT)

This is the idea that budget deficits and national debts are not a bad thing. Also, that governments should spend lavishly on public services, and the state should expand more and more and look after us from the cradle to the grave.

This sort of approach seems to be a short road to disaster! (Anderson)

It is to me such a ludicrous idea, that its difficult to take seriously… If governments need more money, and they have no restrictions, they just print more money! … But no real value is created by printing more money… if you print enough money the value of the Australian dollar has to go down… To me it’s a disguised form of taxation… it can work in the very short term to stimulate the economy… if we adopt this as our modus operandi, it’s bound to be disastrous. (Stone)

To me, a jurisdiction that embarks on MMT has blown its credibility, has no sense of responsibility for the privation of future generations or is enacting an agenda that has already written off national economies, as they are ushering in a new global digital currency – central bank digital currencies (CBDC). The only way I can see a CBDC working is if there is no longer the nation-state, democracy is finished, and dictatorship controls everything and everyone. This is a recipe for madness!

China

Looking back, it is easy to see the madness of the Western world since 1978, when China opened up to reform its economy. We closed our manufacturing industry and ceded it to cheap, often slave, labour in China. That was such a big mistake. The Western world could not see past the short-term gain of cheap goods; we could not see the power that this move has given the Chinese as an effective competition for the world’s last remaining superpower, the USA.

It’s obvious that there are some real stresses in the Chinese economy. (Anderson)

Every time there has been a downturn in their economy, they have thrown enormous amounts of money at it… That said, the Chinese are a tremendously entrepreneurial people… But any corporate business will now have to do as they are told by their one-party communist state. (Stone)

Stone’s fear is that in the light of weak Western leadership, China may do some aggressive things, economically and strategically.

Two years on, the threat is still there, but I think the level of threat is diminished somewhat. I commend to you the work of Peter Zeihan on economic analysis. His prediction — Global Economic Growth is Collapsing (Here’s Why), published on 1 May 2023, is worth a watch.

There is No Climate Crisis

I am someone who believes that this is an entirely fabricated crisis. There is no crisis with the climate. There is no evidence for any worrying levels of anthropogenic warming. The idea that here is an urgent need to throw tens of billions of dollars at large companies to provide subsidies of all sorts for renewable energy technologies is entirely absurd. (Stone)

Stone is all for exploring new technologies that produce genuinely sustainable alternatives to fossil fuels, but not at the expense of our economy.

Make Corporate Tax Changes

The discussion concluded with a look at the impact of the COVID era on small businesses in particular. (Kevin Andrews‘ piece in the Daily Declaration recently documented the demise of small businesses in Victoria).

Stone is scathing in his criticism of government policy that has benefited big business at the expense of small. He argued that if the entrepreneurial spirit is crushed in Australia, it will take a very long time to recover.

He contended that small businesses’ tax rate should be lowered to 15% (currently 25%) and big business tax rate ought to be increased to 35% (currently 27.5%). He believes this would, at a stroke, go a very long way to redress some of the wealth distribution anomalies and inspire a renewal of confidence in the nation.

Our World Has Gone Mad!

It seems to me at so many levers that could be pulled to change the trajectory of our own nation’s economy and the world as a whole. But sadly, there is hardly any political will to think outside the tram lines of the globalist, woke, identity politics that has bewitched us for too long.

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Photo by Monstera Production.